06 Feb Should I sign a mortgage modification agreement?

Based upon all of the agreements I have seen lately, the answer is clearly NO! Mortgage companies coerce homeowners into signing these oppressive agreements that include waiver of liability clauses releasing the lender from any wrongdoing.

I met with a firefighter and his wife yesterday regarding a foreclosure defense case. They had a first mortgage through Chase with a decent fixed rate, and their troubles had nothing to do with a change in their economic circumstances. Rather, Chase unexpectedly jacked up their escrow by a few hundred dollars per month to provide an â€œescrow cushion.â€

Well, it is common knowledge that these mortgage companies keep most interest earned on escrow accounts, which rightfully belongs to the homeowner. So, this couple was genuinely upset and sought answers from Chase. Of course, as anyone who has tried knows all too well, it is impossible to get answers from mortgage servicers.

As a result of the escrow increase, this couple fell behind in their mortgage payments. They actively sought a resolution with Chase, and in June of last year, they entered into a modification agreement that they believed resolved the dispute with the escrow account.

After execution of the agreement, the homeownersâ€™ next bill included the same jacked up escrow amount that was the subject of the original dispute. They were told to not pay that bill until the matter was straightened out. They are now two months behind and scared of losing their home.

Within the Mortgage Modification Agreement signed by the homeowners was the following release language:

IV. RELEASE OF LENDER

In consideration of [lenderâ€™s] willingness to enter into this Modification, each of the undersigned Borrowers agree, jointly and severally, to presently release Chase Home Finance, LLC, JPMorgan Chase Bank, NA, and their affiliates, subsidiaries, officers, directors, employees, investors, agents, attorneys, and each predecessor and successor thereto, from any and all claims, demands, actions, causes of action, and liabilities, whether known or unknown, arising out of or in any way connected to the Loan, the Note, or other loan documents. This release is effective upon your execution of this Agreement, and is not conditioned upon your satisfaction of the conditions required by this agreement. [Emphasis added.]

I believe the sole purpose behind a lenderâ€™s willingness to enter into a mortgage modification agreement is to seek a release of liability. It is necessary to increase the chances of a swift foreclosure in the future.

A homeowner should never sign a modification agreement with release language in it, as it evidences a complete lack of good faith on the part of the lender.

Chip Parker is the managing partner of Parker & DuFresne, P.A., where he represents Northeast Florida businesses and consumers facing bankruptcy, and homeowners facing foreclosure. His firm files more homeowners in the Mortgage Modification Mediation Program than any other law firm in Northeast Florida.
Parker is the recipient of Jacksonville Area Legal Aid's prestigious Award for Outstanding Pro Bono Service. Mr. Parker is an active member of the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.